The European markets rose for the third day on Monday, as investors were cheered by the U.S. government's plan to help banks remove as much as $1 trillion in bad assets from their books and a report showing a surprise increase in U.S. home sales.
The U.S. Treasury Dept. today released details of a plan to buy up the toxic assets through a combination of $100 billion in TARP funds and private investment. The Public Private Partnership Investment Program is designed to boost the current efforts which have been largely unsuccessful in unfreezing the credit markets and promoting consumer lending, rendering a financial system is still working against economic recovery, the Treasury said in a statement.
The Treasury's response involves using up to $100 billion in funds from the $700 billion financial rescue plan passed in 2008 in addition to capital from private investors to generate an estimated $500 billion to purchase the toxic assets, a number that could double to $1 trillion over time, the Treasury said.
The National Association of Realtors said in its report that existing home sales rose 5.1% to a seasonally adjusted annual rate of 4.72 million units in February from a pace of 4.49 million units in January. Economists had expected sales to slip to a 4.45 million unit rate.
Crude for May delivery rose $1.37 to $53.44 a barrel on the New York Mercantile Exchange, by the time the European markets closed, as stock markets in the U.S. and abroad rallied after U.S. Treasury Secretary Timothy Geithner unveiled the plan to resolve the nation's banking crisis.
The FTSEurofirst 300 index of pan-European blue chips closed 3.01% higher at 739.52 points, while the narrower DJ Stoxx 50 index rose 3.61% to 1,829.34 points.
Around Europe, the U.K.'s FTSE 100 index climbed 2.86% to 3,952.81, while France's CAC 40 index surged up 2.81% to 2,869.57 and Germany's DAX index rose 2.65% to 4,176.37.
Banking stocks were among the biggest gainers. HSBC, Europe's largest bank, rallied 12.6%, while BNP Paribas, France's largest bank, climbed 9% and Deutsche Bank, Germany's biggest lender, surged up 8.5%.
Barclays, Britain's second largest bank, and UniCredit, Italy's largest bank, jumped 15.7% and 15.1%, respectively.
Heavily weighted oil stocks gained, as crude oil prices rose. BP, Europe's biggest oil company, surged up 2.6%, while Royal/Dutch Shell, the second biggest, climbed 3.4% and Total, the third biggest, added 1.1%.
Similarly, mining stocks rallied after copper prices advanced. BHP Billiton, the world's biggest miner, rose 4.2%, while Anglo American, the second biggest, surged up 5.8% and Rio Tinto, the third biggest, climbed 13%. Kazakhmys, Kazakhstan's largest copper producer, gained 9.2%.
SABMiller, the world's second largest brewer, rose 3.2% after Goldman Sachs upgraded the stock to neutral from sell.
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